Yesterday, the Ontario Superior Court (the "Court")
imposed an administrative monetary penalty ("AMP") of
$500,000 on Rogers Communications Inc./Chatr Wireless Inc.
("Rogers/Chatr") for not conducting adequate and proper
testing prior to making claims that the Rogers/Chatr mobile network
had dropped fewer calls than those of its competitors Wind Mobile
and Public Mobile.
While the Court found that claims by Rogers/Chatr that it had
fewer dropped calls than its competitors were ultimately
substantiated (through testing after the claims were made), it also
found that Rogers/Chatr had not conducted "adequate and
proper" testing prior to making the claims in question, as
required under the Competition Act.
According to the Court, Rogers/Chatr understood the necessity of
validating performance claims before making them. Although
Rogers/Chatr had an ongoing drive test program (implemented in 2005
at a cost of $20 million), it did not rely on the program to
conduct adequate and proper testing before launching its
"fewer dropped calls" campaign in the summer of 2010.
The Court also found that Rogers/Chatr had made a deliberate
decision to make the claims based on results inferred from
"technological facts" suggesting the superiority of their
networks based on higher cell site density, indoor transmission
systems, low-frequency spectrum and seamless handoffs. In other
words, Rogers/Chatr had relied on technological facts instead of
conducting the necessary testing – an approach that was held
not to satisfy the "adequate and proper" testing
requirement under the Competition Act.
In terms of the AMPs imposed, given that the performance claims
were ultimately proven to be true and substantiated, this was
viewed as a mitigating factor in determining the appropriate amount
of the AMP to be imposed on Rogers/Chatr (it is worth noting that
the Commissioner sought AMPs in the range of $5-7 million). The
Court also took into account the reputational harm suffered by
Rogers/Chatr and rejected the Commissioner of Competition's
request for a prohibition order that Rogers/Chatr not engage in
similar reviewable conduct for a period of 10 years.
The key take away is that businesses intending to launch
marketing and advertising campaigns where claims relating to
performance, efficacy or length of life are to be made must ensure
that all such claims are substantiated by adequate and proper
testing before they are made.
For a copy of the Bureau press release, please click here.
For a copy of the Ontario Superior Court decision, please click here.
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The Canadian Competition Bureau issued a template document for use as a form of Consent Agreement, to be filed with the Competition Tribunal to resolve concerns the Bureau may have with proposed mergers.
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